Credit Card Benefits and Drawbacks

Credit cards have both benefits and drawbacks. It is wise to consider both before applying for a credit card. While they can be very useful, credit cards can also be risky. Even people who are usually good with their money get into trouble with credit cards. A credit card can be useful, but may also end up putting you in a difficult financial situation if misused.

Here are some of the benefits of credit cards:

Withdraw cash 24 hours a day, anywhere in the world.

Buy online. It is the quickest and easiest way, and you are protected against credit card fraud.

Repay in regular instalments. Typically, these incur interest.

Usually, there is an interest-free repayment period, which you can use to repay your debt in full, interest-free.

One of the main benefits of using a credit card rather than a debit card is the protection provided by the Consumer Credit Act. This says that if you have problems with goods or services you can get your money back from the card issuer if you can't get it back from the supplier.

Some cards provide purchase protection insurance, which pays out if something you have bought with the card is lost, damaged, or stolen within ninety days of the date of purchase.

A credit card can cost nothing - if you pick a card that doesn't charge an annual fee and you always pay the bill in full every month.

A credit card can save you money if you choose one that earns you cash every time you buy something. How much cash you get back is calculated as a small percentage of the amount you have spent on the card. Some cards offer incentives other than cash - Air Miles or shopping vouchers, for instance.

Even if you do not pay your monthly bill in full, a credit card can be cheaper than running an overdraft on your current account, especially if your bank charges a monthly fee as well as interest when you overdraw.

Using a credit card can work out cheaper than using traveller's cheques or foreign currency to pay for things abroad. This is because the exchange rate used by card companies to convert foreign spending into sterling is better than normal tourist rates. However, because of credit card charges for cash withdrawals, a debit card is better if you want to use plastic to buy currency, whether over the counter or from a foreign cash-machine.

You can give to charity for free if you sign up for a charity credit card.

Credit cards are often cheaper than loans for short-term borrowing. You pay interest on the remaining debt, not the full amount - and there are no early redemption penalties.

Credit cards offer flexibility to match uneven income and expenditure patterns: you choose what to pay off each month, between the minimum and the total outstanding.

Their consolidated accounting enables one cheque to settle multiple transactions - while all appear neatly on one pre-prepared statement each month.

There is an automatic 'interest free' period per statement period.

Credit cards enable remote purchasing via the internet, by telephone or mail order.

Credit cards can include additional benefits like insurance cover on purchases, cash-back, AirMiles, Nectar or Reward points, and holiday discounts.

Here are some of the drawbacks of using a credit card:

Credit cards can be unnecessarily costly.

Credit cards may be expensive for cash withdrawals

Credit cards may be expensive for foreign currency purchases.

Their credit limits can be insufficient for your requirements.

They encourage a 'pay now, worry later' mentality and make it too easy to get into debt.

Credit cards are very open to fraudulent use.

You may freely reprint this article provided the author's biography remains intact:

About The Author
John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

More Resources

Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exiting

More Credit Information:

Related Articles

Avoiding College Credit Card Traps
Congratulations college freshman! You're about to embark on one of the most exciting times of your life. By now your parents, siblings, and friends have offered you all kinds of advice on how to make your transition to college smoother - how to get along with your roommate, what classes to take and which ones to avoid, where to find the best off-campus food, and how to stay safe on campus.
What You Need to Know about Debt Negotiation on Credit Cards
Debt negotiation on credit cards is often referred to as credit card debt settlement. Whenever you make a credit card payment- or even pay your utility bills- it usually gets reported to one- or all- of the three main credit agencies.
Credit Card Benefits and Drawbacks
Credit cards have both benefits and drawbacks. It is wise to consider both before applying for a credit card.
Credit and Banking Money Saving Services
The first rule when applying for banking and credit services is to always read the fine print and to understand all of it. Read up, take it home, and analyze it, ask the banking manager questions.
5 Things Your Credit Card Company Keeps Quiet About
Credit Cards can bankrupt you if you let them run away from you. The various Credit Cards companies are in it for profit so they will not generally alert you to things you can do to save yourself money.
Your Credit Card May Be Costing More Than You Think!
Do you know what your credit card is truly costing you? Manypeople assume that they do, but aren't familiar with thehidden fees that many credit card companies are charging. Infact, if you don't keep close tabs on your credit card, youmay end up paying hundreds of extra dollars per year-withoutever really knowing it!And if you're trying to budget your money, those hidden feescan add up!Let's take a look at some of the most common credit cardfees, and then talk about how you can avoid them.
How Does a Creditor Determine Whether to Grant You Credit?
Credit 101How does a creditor determine whether to grant you credit? For many years, creditors have been using credit scores and credit scoring systems to determine if you'd be a good risk for a loan or credit card. More recently, credit scores have been used to help determine what rates you pay for insurance.
Collection Agency Secrets for Collecting on Bad Debt
Getting worried that one of your clients, customers or patients will never pay? Have you given up on a customer who's essentially said he won't pay? Congratulations--being stiffed by a customer or patient is a milestone in the growth of a business or medical practice. But even the most hopeless of bad debts can sometimes be collected-collection agencies have been doing it for years.
Commercial Collections: Business Finance Booster Shot
Commercial collections: fixture of the new B2B cultureIf you're in the business-to-business field, or even if you're a consumer products business that works through third-party distribution channels, you probably know what it's like to check your mail anxiously each day, sifting through all the bills for that payment that was supposed to have been in months ago.It wasn't supposed to be like this.
Your Consumer Rights
If you have ever fallen behind on your debts you already know that dealing with your creditors can be a hassle. Sometimes it can be downright humiliating.
Cutting Credit Card Costs
What are the APRs charged by the credit cards in your wallet? If you are paying more than 12% interest on any of them, you are probably paying too much. The prime rate is currently in the single digits, so credit card companies that charge above 13% APR are overcharging.
Credit Repair Services vs. Do-It-Yourself Credit Repair
Millions of Americans suffer because of bad credit these days, and almost all of these people turn to the Internet for help. In the past 5 years hundreds of 'internet-based' credit repair services have sprung up, preying on consumers in need of real help.
Cash Back vs. Rewards Credit Cards
Ah, the sweet rewards of using credit!Not only do you get immediate gratification with the buy now-pay later plastic, but now, many credit cards offer rewards and incentives for using their card to make purchases. You can get cash back, or gift cards, or 'reward points' that you can spend on merchandise or services from various merchants.
Tackling Bad Credit
The first time I heard the term credit history was when I approached a lender for a secured loan. Being a first timer I was completely ignorant of the procedure and didn't even know that a credit record of our transactions is prepared by some credit reference agencies.
How To Start A Second SEPERATE Credit File!
Your personal credit file is separated from those with the same or similar names by several factors, including a driver's license number, birth date, or spouse's name. Although these are three important identifying marks, the number one identifying mark on your credit report is your social security number.
Credit Report Hassles
There is no end to the amount of pain that your credit report can cause you. If you have a bad credit history this is something that can follow you around and wreak havoc on your life without you even knowing it.
Choosing the Best Low Interest Credit Card
With so many low interest credit cards on offer, how do you know which one to choose? Here is a brief guide for choosing your low interest credit card.The Chase Manhattan MasterCard is a great choice, for those with an excellent credit rating.
Boosting Your Credit Score To Get The Best Credit Card Deal
Making Your Credit Rating Work For YouOne of the basics of getting the most competitive credit card deal in the market is to ensure you have the best credit record possible. Few of us are lucky enough to be earning a six-figure salary, and many people are likely to have other financial undertakings that a potential lender will want to take into account.
How To Protect Yourself Against Credit Card Fraud
In the high tech world of today, credit card fraud is an ever increasing problem.By 2005 it is estimated that the online payment industry will capture $12.
Trying to Land a Job? Poor Credit Scores May Hurt Your Chances
Many employers are now looking at an applicant's credit report for hiring purposes. During an interview process a potential employer may request your written consent to access your credit report.